How do you enforce penalty fees?

[Christopher Davis]

In the spirit of “training your tenants,” how do you enforce when fees are applied due to late rent, non-compliance fees, etc. You add a fee to the monthly rent, but how do you enforce their payment? Or you bill the fees separately? And how do you enforce their payment if the tenant simply ignores it and pays the rent amount only?

Thank you

[Mitch Messer]

Hi @Christopher Davis and welcome to BiggerPockets!

Our lease agreement clearly states that funds paid by the tenant will be applied to outstanding non-compliance fees FIRST, and then whatever is left will be applied to unpaid rent.

So, for example, let's say rent is $1000 (due on the 25th) and our late fee is $10/day until paid. On the 28th if the tenant rolls up and pays $1000, that will be processed as $30 in late fees and $970 in rent, meaning they are still owing $30 in rent. And, since late fees continue to accrue until they are current, tomorrow they will owe $40 ($30 in rent plus $10 in late fees.)